International Game Technology’s (IGT) stock price soared over the past year, gaining more than 107%.
I expect that the company’s 2021 outlook will provide a solid support to higher share prices for several weeks ahead. Thus, I am bullish on this stock. (See Analysts’ Top Stocks on TipRanks)
International Game Technology is a global leader in gaming, targeting growth through players’ engagement in its gaming machines, lotteries and sports betting services. Its customers are also using International Game Technology’s digital entertainment.
The company runs its business across the United Kingdom wherein the city of London hosts the main office. International Game Technology also has an international presence in more than 100 countries with regulated markets for gaming and betting.
Q3 Earnings
Total revenue went up significantly in the third quarter of 2021. It reached $984 million, which was up nearly 21% year-over-year. The top line did better than expected, surpassing analysts’ projections by $3 million.
In terms of year-over-year revenue growth, Global Lottery increased 14%, Global Gaming increased 33.8%, and Digital & Betting increased by 37%.
The Global Lottery business accounted for 66.2% of total revenues, Global Gaming made up 29.4%, while Digital & Betting added 4.4% to the total.
Three factors are mainly responsible for the switch to GAAP earnings of $0.31 per share in the third quarter of 2021 from the net loss of $0.62 per share in the prior-year quarter.
Higher sales and the implementation of an efficient cost management and reduction policy combined with favorable rates across foreign currency markets to drive the turnaround.
The company beat analysts on earnings per share as well by $0.22 on average.
The adjusted EBITDA was $407 million in the quarter versus $287 million a year ago.
Thanks to a strong cash flow generated by ongoing activities and the sale of a gaming business in Italy, the net debt position of International Game Technology improved to $6.1 billion as of the third quarter of 2021, from $7.3 billion as of the final quarter of 2020. The net debt leverage dropped to 3.8x from 6.4x.
Path to Growth
These markets should expand enormously as technology introduces new ways to perform gaming and betting, and because more countries increasingly welcome these activities.
A multi-year agreement inked with Cliff Castle Casino located in Camp Verde, Arizona, will allow International Game Technology to take advantage of the strong expansion that the sports betting market is experiencing in Arizona. International Game Technology wishes to enrich the retail sportsbook of the gambling house in a way to attract more players and increase the time spent at the Casino.
Overall, the business of International Game Technology is expected to keep on capitalizing on positive trends in gambling and betting.
Looking Ahead
The company targets total revenue of approximately $4.1 billion versus analysts’ average projection of $4.07 billion in full-year 2021.
The company also guides for an operating income of $900 million and an operating cash flow of $850 to $900 million.
Wall Street’s Take
In the past three months, four Wall Street analysts have issued a 12-month price target for IGT.
The average International Game Technology price target is $46.33, implying 84.1% upside potential. The company has a Strong Buy consensus rating, based on three Buys, one Hold and zero Sells assigned.
Summary
The stock is well positioned to have its shares rise steadily but gambling and betting must stay supportive. In general, these activities create a dependency that keeps the consumer coming back.
Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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